“Natural gas markets tend to be so local that you almost need to be a political forecaster to find hedges there, whereas oil prices tend to rise around the world together,” Gilbert added.
For example, she points to oil & gas services and exploration & production companies like Marathon Oil (NYSE: MRO) and Basic Energy Services (NYSE: BAS).
The PowerShares S&P SmallCap Energy Portfolio (NasdaqGS: PSCE) has the largest position in BAS at 3.0% of its portfolio. The iShares U.S. Oil & Gas Exploration & Production ETF (NYSEArca: IEO) has the largest weight in MRO at 3.6% of the fund’s portfolio. Both PSCE and IEO track U.S. companies, but the two funds focus on different asset categories and sub-sectors. [These ETFs are Loaded With the S&P 500’s Best Stocks]
PSCE tracks small-cap energy companies taken from the S&P SmallCap 600 index that produce, distribute or service energy related products. The ETF’s capitalization weights include small-caps 62.4% and micro-caps 37.7%. PSCE is up 12.1% year-to-date.
IEO follows U.S. companies that engage in the exploration, production and distribution of oil and gas. The fund’s market capitalization weights include mega-cap 14.0%, large-cap 58.1%, mid-cap 22.3% and small-cap 4.7%. IEO is up 16.3% year-to-date.
For more information on the energy sector, visit our energy category.